Tale of two Australias: Gas rush splits town

VirginiaHarrison

Courtesy of NickJ

A skyline of Gladstone, on an overcast day in Australia's Queensland, combines yachts and smokestacks, emblematic of the nation’s two-speed economy.

GLADSTONE, Australia (MarketWatch) — Banking on coal-seam gas to fuel its next wave of resource riches, Australia is fostering the budding industry involving a lot of dirt, trucks and pipes. And money.

In the grubby but sun-kissed port town of Gladstone in central Queensland, some construction workers are pulling in wages up to three times their counterparts in other parts of the country.

Driving the boom is the transformation of Gladstone harbor into a liquefied natural gas (LNG) export hub to feed Asia’s swelling appetite for energy.

“The benefit of this boom that is different to the last one, during 2004 and 2007, is that other than in [resource-rich] Western Australia, the rest of the country is doing nothing,” said Leo Zussino, chief executive of the Gladstone Ports Corporation (GPC).

“There aren’t many places in Australia where masses of jobs are being created,” Zussino said.

Three mega liquefaction facilities for coal-seam gas are being built on Curtis Island, just north of Gladstone. A fourth plant backed by Royal Dutch Shell PLC (RDSB) and PetroChina Co.
PTR, -3.39%
(857) is expected to be approved later this year. A 2.5 billion Australian dollar ($2.6 billion) expansion of a coal export terminal is also underway.

Already the town throbs with construction workers, and Zussino expects the projects will create more than 15,000 new jobs.

But this industrial hotspot provides a glimpse of Australia’s broader two-speed economy. While the resources boom drives growth and jobs, other sectors in Gladstone are under sharp stress.

Manufacturing — which accounts for more than four times as many jobs as the mining sector in Australia — is buckling under the weight of a soaring Australian dollar
AUDUSD, +0.1810%
and a still-soft global economy. Retail, financial and aviation industries are also shedding jobs across the country, as economic pressures weigh.

Reuters

A Taiwanese dry-bulk carrier is loaded with coal at the Gladstone port.

Boom town

Gladstone landlord Jan Simmons, who owns several properties in the area, has seen rents almost triple over the past five years .

“We’re doing pretty well,” Simmons said.

At the same time, Simmons says the main street of Gladstone has never been so empty. Smaller businesses and retail shops have closed down, unable to cope with cost and labor pressures carried with the boom.

“The gap between the rich and the poor is only going to get worse,” says one local business owner.

With about 70% of the LNG workforce estimated to be “fly-in-fly-out” temporary residents, affordable housing in Gladstone is scarce. Around town, everyone seems to know someone who has moved on as rents push out of reach.

Gladstone Economic and Industry Development Board (GEIDB) Chief Executive Ken King said the problem has emerged “at the bottom end.”

“Housing is an issue and if you’re on a fixed or low income, and then the landlord says I’m going to double your rent. Some people, retirees in particular, have made the decision they can’t afford to be here,” King said.

“This year we’ll see also a transport and traffic issue, as you put another 5,000 people into the town,” King said.

Local residents are chasing bigger money on the LNG hub of Curtis Island. King says while a security guard in Gladstone takes home around A$50,000 a year, a few miles away on Curtis Island the job pays A$80,000.

“There’s a shortage of taxi drivers in Gladstone because the drivers prefer to take a higher paid job on the island,” he said.

“For businesses in Gladstone the issue is how they backfill those positions. We haven’t really seen the start of it yet, but that’s what’s happening,” King said.

Gladstone Ports Chief Executive Leo Zussino is unapologetic about the social strain the gas-rush is enforcing.

“You’ve got 30 billion dollars worth of construction activity taking place in a very narrow time frame, of course there are going to be pressures,” he said.

Dead fish spark outcry

For Zussino, conservationists are proving a bigger headache.

Growing noise about the sustainability of the developments — in particular the impact on neighboring Great Barrier Reef — is frustrating those steering the multi-billion dollar developments.

Environmental groups are among those concerned that dredging of Gladstone harbor — necessary to allow increased shipping traffic to service new industry — will have a detrimental impact on the iconic reef.

Dredging has drawn further scrutiny following an outbreak of diseased fish which the GPC argue was a result of massive flooding last year. A number of independent scientific reports have shown no conclusive evidence linking the outbreak to dredging.

The issue has however, sparked the attention of United Nations Educational, Scientific and Cultural Organization (Unesco), which last year expressed concern with the LNG developments on Curtis Island and proximity to the reef, which Unesco has designated as a World Heritage Site.

Next month, Unesco officials will descend on Gladstone to inspect the impact of the developments on the natural environment.

Drew Hutton, president of the Lock the Gate Alliance — a movement opposing the coal seam gas industry — describes what’s occurring at Gladstone as “mining and resource extraction at any cost, development at any cost mentality.”

“From the potentially devastating impacts on underground water and good farm land, right through to the environmental impacts of land clearing, until we get to Gladstone harbor, where an ecosystem collapse has occurred because of the dredging,” Hutton said.

“The [CSG] projects have been a disaster from start to finish because they leapt into it without the proper research and precautions, with levels of dredging we’ve never seen before,” he said.

But GPC’s Zussino argues dredging “has never been an issue in the past.”

“The environmental [lobby] know the right buttons to push to get electoral support. They do it very well, and it makes our job harder,” he said.

“The dredging project has massive monitoring and under any independent scientific assessment the dredging is having very small impact upon the water quality of the Gladstone harbor,” Zussino said.

“The prosperity of this country was built up on wool and wheat, coal and iron ore. Trade in Australia going to grow exponentially over the next 30 years and create a lot of prosperity. Do you say, we’re going to stop doing this because we don’t want the dredging to take place?” he said.

It’s a sentiment echoed by GEIDB’s Ken King.

“LNG is part of a long-term plan that hasn’t been cooked up overnight. This is the growth that has been planned for Gladstone,” he said.

“People have said we should have stopped. But realistically, this is part of Queensland’s strategic future.”

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